Guides / Card fees from tips

By NorseHorse. Updated October 16, 2026. General information, not legal advice; your state's labor department has the final word on state rules.

Under federal law, sometimes, but only the card company's actual percentage fee on the tip, never more, and never so much that your pay drops below minimum wage. Several states ban the deduction outright, including California, Colorado, Maine, Minnesota, New Jersey and Pennsylvania. Either way, card tips are due by your regular payday.

The federal rule

The Department of Labor's Fact Sheet #15 sets out the rule under the Fair Labor Standards Act (FLSA, the federal wage law). When a customer puts a tip on a card and your employer can show it pays the card company a percentage on those sales, it may pay you the tip minus that percentage. The DOL's own example: if the card company charges 3 percent, the employer can pay you 97 percent of the tip.

The limits matter more than the permission:

• No more than the actual fee. The employer can't take more out of your tips than the transaction fee the card company charges, whether or not it takes a tip credit. Taking more is a "keeping" violation: the law treats it the same as the employer pocketing your tips, which the FLSA bans outright.
• Not below minimum wage. The fee can't push your pay below the required minimum wage, counting any tip credit the employer claims.
• Paid on time. The tip is due no later than your regular payday, and the employer can't hold it while it waits to be paid by the card company.

So the federal rule doesn't cover an extra "admin fee" on top of what the processor charges, a percentage higher than the processor's rate, or the fee on the whole bill taken out of your tip. The fee your employer may pass on is the fee on the tip, not on the food.

A worked example

You get $200 in card tips in a week, and the processor charges your employer 3 percent. The most the employer can take is $6, so you're owed at least $194. If payroll takes 5 percent ($10), the extra $4 is tip money the employer kept. Washington's labor department gives the same math for a bill: a 1 percent fee on a $100 order plus a $20 tip is $1.20, and only the $0.20 that belongs to the tip can come out of it.

States that ban the deduction

Fact Sheet #15 itself warns that some states have stronger rules and don't let employers take card fees from tips at all. These are the states where our state pages, checked against each state's labor department or statute, show a ban or a limit. If your state isn't listed, the federal rule applies unless your state page says otherwise.

How to check your pay stub

1. Find your card tip total for the pay period. Your end-of-shift checkout report from the register or POS usually shows card tips. Add up every shift in the period. A tip log makes this easy.
2. Find the card tip line on the stub. It may be called charged tips, CC tips or something similar. New York requires the wage statement to show tips and wages separately.
3. Compare the two. In a ban state, they should match. Elsewhere, divide the gap by your card tip total. If the result is above the processor's rate, or the deduction isn't explained anywhere, ask payroll what rate it uses and how it's figured.
4. Check the timing. Card tips should be on your check by the regular payday (in Minnesota, the next pay period), not held back while the employer waits on the card company.

If card tips are handed to you in cash at the end of the night, compare what you were given with what the checkout showed, and write both down.

What to do if the numbers are wrong

• Ask in writing first. A short message to the manager or payroll asking what fee rate is being taken, and why, gives you a record. A wrong payroll setting can be the whole problem.
• Keep your own record. Save your checkout reports and pay stubs. Your own dated shift log is evidence too.
• File a complaint. The federal Wage and Hour Division takes complaints at 1-866-487-9243. It says complaints are confidential and that an employer can't retaliate against you for exercising your rights. If your state has its own rule, you can also go to the state labor agency, listed on your state's page under "If you are underpaid".

Over-deducting card fees is one form of tip theft. The steps for documenting it and getting the money back are in what to do about tip theft, and the rules on who may touch your tips at all are in can a manager take your tips.

Common questions

Is it legal for a restaurant to charge servers the credit card fee?

Under federal law, only the processor's actual percentage on the tip, and only if it doesn't drop you below minimum wage. In California, Colorado, Maine, Minnesota, New Jersey and Pennsylvania it isn't allowed at all.

Can my employer hold card tips until the card company pays?

No. Federal law says the tip is due by the regular payday and can't be held while the employer waits for reimbursement. California, Maine and New York require card tips by the next payday, and Minnesota by the next pay period.

My employer takes the fee only from tips, not from the bill. Is that allowed?

The employer may take the fee on the tip, not the fee on the whole sale. In a ban state it can take nothing.

Does it matter if I'm paid the full minimum wage before tips?

Under federal law the actual-fee limit applies whether or not your employer takes a tip credit. Pennsylvania's labor department answers the same question for workers paid at least $7.25 an hour: still no deduction.

Track it all with Cashout. Shifts, tips, unpaid breaks, taxes, and mileage, logged in seconds. iPhone · Android